In 2022 and 2023, a US bank regulator urged lenders to temporarily stop direct involvement in cryptocurrency activities. However, in contrast to industry complaints of rampant “debanking,” banks were not told to cease serving crypto companies outright, according to newly public documents.
Those came into the public domain after a lawsuit filed by History Associates Incorporated-a research firm that Coinbase hired-won a court order forcing the FDIC to release supervisory “pause letters” sent to banks. The federal court ordered less-redacted versions to be produced; 25 such documents were released on Friday, including two letters not hitherto disclosed.
The Push for Transparency by Coinbase
Coinbase has also said that it believes regulators of U.S. banks were on a concerted campaign to cap crypto firms’ access to the traditionally mainstream financial avenues. In releasing the newly released documents exposing the coordinated effort to stop a wide variety of crypto activity, Coinbase’s chief legal officer, Paul Grewal, called on Congress to do more investigations on the matter.
FDIC Response and Internal Memo
Also in response to the claims, the FDIC issued a 2022 internal memo. It outlines the supervisory approach that should be considered when one Bank approaches and asks for inquiries to determine whether a deal in crypto-assets directly and provision of standard banking to crypto companies take place.
The internal memo makes a differentiation between two cases:
Direct involvement in crypto activities: Banks that are directly into crypto, including holding crypto assets, have to go through increased scrutiny. Crypto Banking Services: Traditional services, such as deposit accounts and loans, are less of a regulatory headache when it comes to crypto-related businesses.
The memo repeats what FDIC Chairman Martin Gruenberg said in December. Gruenberg, while stating the agency does not strong-arm banks into “debanking” crypto firms, emphasized supervisory attention deserved for direct crypto involvement due to possible risks. Unpacking the Risks and Caution The cautious stance of the FDIC on the crypto industry follows from its history of fraud, bankruptcies, and extreme market volatility. The memo underlines that crypto-related activities may pose significant risks to consumer protection, financial stability, and the safety of banking operations. These risks, though, are still considered “evolving.”
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